Australian Foundation Investment Co (AFI), the country’s largest listed investment company, has surprised by lifting final dividend after recording a 10% lift in net profit for the year to June 30.
The Melbourne based company, which is the larger sibling of investment groups, Djerrawarrh (DJW) and Mirrabooka (MIR) (which reported their full year results last week and the week before) told the ASX yesterday that earnings came to $242.8 million for 2012-13. That’s up from just over $219 million earned in 2011-12.
The company will pay shareholders a final dividend of 14c a share, up a cent on the final paid in respect of the 2011-12 year.
That means total payout to shareholders will be 22c a share after the 8c a share interim paid earlier this year.
Directors said that 3c of the final dividend "are sourced from capital gains, on which the Company has paid or will pay tax".
"The amount of the pre-tax attributable gain, known as an “LIC capital gain”, is therefore 4.3 cents. This enables some shareholders to claim a tax deduction in their tax return. Further details will be on the dividend statements."
AFIC shares closed up 2c at $5.58 following the release of the results yesterday.
AFI 1Y – AFI lifts revenue, profits and dividend
Unlike Mirrabooka and Djerrawarrh, which reported lower revenue and earnings, but held dividends steady for investors, AFI lifted revenue and earnings in 2012-13.
The Net Operating Result which measures the underlying income generated by the portfolio was $234.3 million, up 14.4% from the previous year’s result of $204.8 million.
"The main contributors were an increase in income from the investments and a positive contribution from the trading portfolio of $10.3 million," directors told the ASX in yesterday’s statement.
Revenue from operating activities was $261.2 million, up 6% from the prior year.
AFIC’s portfolio return for the 12 months was 24.4% compared with the ASX 200 Index of 22.8%.
The performance of the portfolio was driven by major bank holdings and other high yielding stocks such as Telstra and Wesfarmers, directors said.
"Major transactions included purchases in APA Group, as a result of its takeover of AFIC’s holding in Hastings Diversified Utilities Fund, Suncorp, QBE Insurance, Coca-Cola Amatil, CSL and Sonic Healthcare.
"Australian Infrastructure Fund was sold as a result of its assets being acquired by The Future Fund. Other sales included holdings in Metcash and CFS Retail Property," directors said.
Like its stablemates, AFI directors sounded a note of caution about the outlook for rates.
"More recently as global markets begin to face the prospect of reduced central bank invention in the US and the slowing of growth in China, the local equity market has retreated from its year highs. Domestic conditions have further compounded concerns with subdued business and consumer confidence, the outlook for corporate profitability and the upcoming federal election weighing on investor sentiment.
"Whilst the present environment causes us to approach the upcoming year with some caution we believe AFIC’s portfolio is well positioned, including having a strong level of cash to continue the process of investing in sound businesses with good long term prospects when value is on offer," directors added.
AFI also announced yesterday that two long time directors were retiring. The most notable was chairman Bruce Teele, a director for 47 years, and chairman from September 1984.
He is a former head of Melbourne brokers, JB Were which sold themselves to Goldman Sachs. Much of the broking arm of Were is now inside the NAB.
The other director retiring is Don Argus who has been a director for 14 years. He was a former CEO of the NAB. Terry Campbell, currently deputy chairman and a long time head of JB Were, will be the new chairman.
